This is focus fiscal period of the document report. For a first quarter 2006 quarterly report, which may also provide financial information from prior periods, the first fiscal quarter should be given as the fiscal period focus. Values: FY, Q1, Q2, Q3, Q4, H1, H2, M9, T1, T2, T3, M8, CY.

This is focus fiscal year of the document report in CCYY format. For a 2006 annual report, which may also provide financial information from prior periods, fiscal 2006 should be given as the fiscal year focus. Example: 2006.

Indicate number of shares outstanding of each of registrant's classes of common stock, as of latest practicable date. Where multiple classes exist define each class by adding class of stock items such as Common Class A [Member], Common Class B [Member] onto the Instrument [Domain] of the Entity Listings, Instrument

Indicate whether the registrant is one of the following: (1) Large Accelerated Filer, (2) Accelerated Filer, (3) Non-accelerated Filer, or (4) Smaller Reporting Company. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.

Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at fiscal year-end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, and unrealized gains and losses on certain investments in debt and equity securities as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.

Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

For an unclassified balance sheet, this item represents investments in debt and equity securities which are categorized neither as held-to-maturity nor trading. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders' equity (other comprehensive income), unless the Available-for-sale Security is designated as a hedge or is determined to have had an other than temporary decline in fair value below its amortized cost basis. All or a portion of the unrealized holding gain or loss of an Available-for-sale Security that is designated as being hedged in a fair value hedge shall be recognized in earnings during the period of the hedge, as should other than temporary declines in fair value below costs basis.

The carrying amount of a life insurance policy on an officer, executive or employee for which the reporting entity (a bank) is entitled to proceeds from the policy upon death of the insured or surrender of the insurance policy.

For banks and other depository institutions: Includes cash on hand (currency and coin), cash items in process of collection, noninterest bearing deposits due from other financial institutions (including corporate credit unions), and balances with the Federal Reserve Banks, Federal Home Loan Banks and central banks.

Represents the caption on the face of the balance sheet to indicate that the entity has entered into (1) purchase or supply arrangements that will require expending a portion of its resources to meet the terms thereof, and (2) is exposed to potential losses or, less frequently, gains, arising from (a) possible claims against a company's resources due to future performance under contract terms, and (b) possible losses or likely gains from uncertainties that will ultimately be resolved when one or more future events that are deemed likely to occur do occur or fail to occur. This caption alerts the reader that one or more notes to the financial statements disclose pertinent information about the entity's commitments and contingencies.

Dollar value of issued common stock whether issued at par value, no par or stated value. This item includes treasury stock repurchased by the entity. Note: elements for number of common shares, par value and other disclosure concepts are in another section within stockholders' equity.

The aggregate of all deposit liabilities held by the entity, including foreign and domestic, interest and noninterest bearing; may include demand deposits, saving deposits, Negotiable Order of Withdrawal (NOW) and time deposits among others.

The amount outstanding of funds lent to other depository institutions, securities brokers, or securities dealers in the form of Federal Funds sold; for example, immediately available funds lent under agreements or contracts that mature in one business day or roll over under a continuing contract, regardless of the nature of the transaction or the collateral involved, excluding overnight lending for commercial and industrial purposes. Also include Federal Funds sold under agreements to resell on a gross basis, excluding (1) sales of term Federal Funds, (2) due bills representing purchases of securities or other assets by the reporting bank that have not yet been delivered and similar instruments, (3) resale agreements that mature in more than one business day involving assets other than securities, and (4) yield maintenance dollar repurchase agreements.

Carrying amount as of the balance sheet date of all assets obtained in full or partial satisfaction of a debt arrangement through foreclosure proceedings or defeasance; includes real and personal property; equity interests in corporations, partnerships, and joint ventures; and beneficial interests in trusts.

Carrying amount as of the balance sheet date, which is the cumulative amount paid, adjusted for any amortization recognized prior to adoption of FAS 142 and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.

For banks and other depository institutions: Interest-bearing deposits in other financial institutions for relatively short periods of time including, for example, certificates of deposits, which are presented separately from cash on the balance sheet.

Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.

Including current and noncurrent portions, aggregate carrying amount of long-term borrowings as of the balance sheet date. May include notes payable, bonds payable, commercial loans, mortgage loans, convertible debt, subordinated debt and other types of debt, which had initial maturities beyond one year or beyond the normal operating cycle, if longer, and after deducting unamortized discount or premiums, if any.

Carrying amount as of the balance sheet date of assets not otherwise specified in the taxonomy. Also serves as the sum of assets not individually reported in the financial statements, or not separately disclosed in notes.

Carrying amount as of the balance sheet date of liabilities not otherwise specified in the taxonomy. Also serves as the sum of liabilities not individually reported in the financial statements, or not separately disclosed in notes.

Dollar value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) whether issued at par value, no par or stated value. This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.

Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment.

Investments which are not defined as or included in marketable (debt, equity, or other) securities whose use is restricted in whole or in part, generally by contractual agreements or regulatory requirements. For use in an unclassified balance sheet.

Total of all Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.

Total number of shares of common stock held by shareholders. May be all or portion of the number of common shares authorized. These shares represent the ownership interest of the common shareholders. Excludes common shares repurchased by the entity and held as Treasury shares. Shares outstanding equals shares issued minus shares held in treasury. Does not include common shares that have been repurchased.

The per share liquidation preference (or restrictions) of nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) that has a preference in involuntary liquidation considerably in excess of the par or stated value of the shares. The liquidation preference is the difference between the preference in liquidation and the par or stated values of the share.

Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt.

Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.

This element represents equipment expense including depreciation, repairs, rentals, and service contract costs. This item also includes equipment purchases which do not qualify for capitalization in accordance with the entity's accounting policy. This item may also include furniture expenses.

Includes amounts charged depositors for: (1) maintenance of their accounts (maintenance charges); (2) failure to maintain specified minimum balances on account; (3) exceeding the number of checks or transactions allowed to be processed in a given period; (4) checks drawn on no minimum balance deposit accounts; (5) withdrawals from nontransaction deposit accounts; (6) closing savings accounts before a specified minimum period of time has elapsed; (7) accounts which have remained inactive for extended periods of time or which have become dormant; (8) use of automated teller machines or remote service units; (9) checks drawn against insufficient funds that the bank assesses regardless of whether it decides to pay, return or hold the check; (10) issuing stop payment orders; (11) certifying checks; and (12) accumulating or disbursing funds deposited in IRAs or Keogh Plan accounts when not handled by the bank's trust department. This item does not include penalties assessed on the early withdrawal of time deposits.

The net gain or loss resulting from a sale of loans, including adjustments to record loans classified as held-for-sale at the lower-of-cost-or-market and fair value adjustments to loan held for investment purposes.

Sum of operating profit and nonoperating income (expense) before income (loss) from equity method investments, income taxes, extraordinary items, cumulative effects of changes in accounting principles, and noncontrolling interest.

The aggregate interest and fee income generated by: (1) loans the Entity has positive intent and ability to hold for the foreseeable future, or until maturity or payoff, including commercial and consumer loans, whether domestic or foreign, which may consist of: (a) industrial and agricultural; (b) real estate; and (c) real estate construction loans; (d) trade financing; (e) lease financing; (f) home equity lines-of-credit; (g) automobile and other vehicle loans; and (h) credit card and other revolving-type loans and (2) loans and leases held-for-sale which may include mortgage loans, direct financing, and sales-type leases.

Net interest and dividend income or expense, including any amortization and accretion (as applicable) of discounts and premiums, including consideration of the provisions for loan, lease, credit, and other related losses, if any.

Interest income on federal funds sold. Federal funds sold represent the excess federal funds held by one commercial bank which it lends to another commercial bank, usually at an agreed-upon (federal funds) rate of interest. Such loans are made for legal reserve requirement purposes of the borrowing bank and generally are of short-duration (overnight).

The aggregate amount of expenditures for salaries, wages, profit sharing and incentive compensation, and other employee benefits, including share-based compensation, and pension and other postretirement benefit expense.

The portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.

The total amount of noninterest income which may be derived from: (1) fees and commissions; (2) premiums earned; (3) insurance policy charges; (4) the sale or disposal of assets; and (5) other sources not otherwise specified.

A fee charged for services from professionals such as doctors, lawyers and accountants. The term is often expanded to include other professions, for example, pharmacists charging to maintain a medicinal profile of a client or customer.

The sum of the periodic provision charged to operations, based on an assessment of the uncollectibility of the loan and lease portfolio, the offset to which is either added to or deducted from the allowance account for the purpose of reducing loan receivable and leases to an amount that approximates their net realizable value (the amount expected to be collected).

Number of [basic] shares, after adjustment for contingently issuable shares and other shares not deemed outstanding, determined by relating the portion of time within a reporting period that common shares have been outstanding to the total time in that period.

The sum of the periodic adjustments of the differences between securities' face values and purchase prices that are charged against earnings. This is called accretion if the security was purchased at a discount and amortization if it was purchased at premium. As a noncash item, this element is an adjustment to net income when calculating cash provided by (used in) operations using the indirect method.

Includes currency on hand as well as demand deposits with banks or financial institutions. It also includes other kinds of accounts that have the general characteristics of demand deposits in that the Entity may deposit additional funds at any time and also effectively may withdraw funds at any time without prior notice or penalty. Cash equivalents, excluding items classified as marketable securities, include short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present minimal risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month US Treasury bill and a three-year Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Compensating balance arrangements that do not legally restrict the withdrawal or usage of cash amounts may be reported as Cash and Cash Equivalents, while legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or company statements of intention with regard to particular deposits should not be reported as cash and cash equivalents.

The aggregate net amount of depreciation, amortization, and accretion recognized during an accounting period. As a noncash item, the net amount is added back to net income when calculating cash provided by (used in) operations using the indirect method.

The difference between the sale price or salvage price and the book value of a property, plant, and equipment asset that was sold or retired during the reporting period. This element refers to the gain (loss).

The amount of cash paid during the current period to foreign, federal, state, and local authorities as taxes on income, net of any cash received during the current period as refunds for the overpayment of taxes.

The net cash inflow (outflow) from the fund lent to other financial institution arising from the excess in reserve deposited at Federal Reserve Bank to meet legal requirement. This borrowing is usually contracted on an overnight basis at an agreed rate of interest.

The net change during the reporting period in interest payable, which represents the amount owed to note holders, bond holders, and other parties for interest earned on loans or credit extended to the reporting entity.

The net cash from (used in) all of the entity's operating activities, including those of discontinued operations, of the reporting entity. Operating activities generally involve producing and delivering goods and providing services. Operating activity cash flows include transactions, adjustments, and changes in value that are not defined as investing or financing activities.

The net cash from (used in) all of the entity's operating activities, including those of discontinued operations, of the reporting entity. Operating activities include all transactions and events that are not defined as investing or financing activities. Operating activities generally involve producing and delivering goods and providing services. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income.

The portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.

The cash outflow associated with the acquisition of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale; includes cash outflows to pay for construction of self-constructed assets.

The net cash inflow (outflow) associated with security instrument that either represents a creditor or an ownership relationship with the holder of the investment security with a maturity of beyond one year or normal operating cycle, if longer.

The cash inflow from the sale assets received in full or partial satisfaction of a receivable including real and personal property; equity interests in corporations, partnerships, and joint ventures; and beneficial interests in trusts. Foreclosed assets also include loans that are treated as if the underlying collateral had been foreclosed because the institution has taken possession of the collateral, even though legal foreclosure or repossession proceedings have not taken place.

The sum of the periodic provision charged to operations, based on an assessment of the uncollectibility of the loan and lease portfolio, the offset to which is either added to or deducted from the allowance account for the purpose of reducing loan receivable and leases to an amount that approximates their net realizable value (the amount expected to be collected).

The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock options, amortization of restricted stock, and adjustment for officers compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.

The change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.

The portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.

Appreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain or loss, net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain or loss at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains or losses realized upon the sale of securities, after tax; and (3) the unrealized gains or losses realized upon the write-down of securities, after tax.

Total of all Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and therefore, do not include all disclosures required by generally accepted accounting principles for a complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments necessary to present fairly the financial condition of Surrey Bancorp, (the "Company), as of June 30, 2011, the results of operations for the six and three months ended June 30, 2011 and 2010, and its changes in stockholders' equity and comprehensive income and cash flows for the six months ended June 30, 2011 and 2010. The results of operations for the three and six months ended June 30, 2011, are not necessarily indicative of the results expected for the full year. These consolidated financial statements should be read in conjunction with the Company's audited financial statements and related disclosures for the year ended December 31, 2010, included in the Company's Form 10-K. The balance sheet at December 31, 2010, has been taken from the audited financial statements at that date.

Organization

Surrey Bancorp began operation on May 1, 2003 and was created for the purpose of acquiring all the outstanding shares of common stock of Surrey Bank & Trust. Stockholders of the bank received six shares of Surrey Bancorp common stock for every five shares of Surrey Bank & Trust common stock owned. The Company is subject to regulation by the Federal Reserve.

Surrey Bank & Trust (the "Bank") was organized and incorporated under the laws of the State of North Carolina on July 15, 1996 and commenced operations on July 22, 1996. The Bank currently serves Surry County, North Carolina and Patrick County, Virginia and surrounding areas through five banking offices. As a state chartered bank, which is not a member of the Federal Reserve, the Bank is subject to regulation by the State of North Carolina Banking Commission and the Federal Deposit Insurance Corporation.

Surrey Investment Services, Inc., ("Subsidiary") was organized and incorporated under the laws of the State of North Carolina on February 10, 1998. The subsidiary provides insurance services through SB&T Insurance and investment advice and brokerage services through LPL Financial.

On July 31, 2000, Surrey Bank & Trust formed Freedom Finance, LLC, a subsidiary operation specializing in the purchase of sales finance contracts from local automobile dealers.

The accounting and reporting policies of the Company, the Bank, and its subsidiaries follow generally accepted accounting principles and general practices within the financial services industry. Following is a summary of the more significant policies.

Critical Accounting Policies

The notes to the audited consolidated financial statements for the year ended December 31, 2010 contain a summary of the significant accounting policies. The Company believes our policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and our Board of Directors. See our Annual Report for full details on critical accounting policies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Bank and the subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from depository institutions (including cash items in process of collection). Overnight interest bearing deposits and federal funds sold are shown separately. Federal funds purchased are shown with securities sold under agreements to repurchase.

Investment Securities

Investments classified as available for sale are intended to be held for indefinite periods of time and include those securities that management may employ as part of asset/liability strategy or that may be sold in response to changes in interest rates, prepayments, regulatory capital requirements or similar factors. These securities are carried at fair value and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or significant other observable inputs.

Investment securities classified as held to maturity are those debt securities that the Bank has the ability and intent to hold to maturity. Accordingly, these securities are carried at cost adjusted for amortization of premiums and accretion of discount, computed by the interest-method over their contractual lives. At June 30, 2011 and December 31, 2010, the Bank had no investments classified as held to maturity.

Loans Held for Sale

The Bank originates and holds Small Business Administration (SBA) and United States Department of Agriculture (USDA) guaranteed loans in its portfolio in the normal course of business. Occasionally, the Bank sells the guaranteed portions of these loans into the secondary market. The loans are generally variable rate loans, which eliminates the market risk to the Bank and are therefore carried at cost. The Bank recognizes gains on the sale of the guaranteed portion upon the consummation of the transaction. The Bank plans to continue to originate guaranteed loans for sales, however no such loans were funded at June 30, 2011 and December 31, 2010.

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal amount adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or cost on originated loans and unamortized premiums or discounts on purchased loans.

Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan using the interest method. Discounts and premiums on any purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on any purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Interest is accrued and credited to income based on the principal amount outstanding. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When the interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Payments received on nonaccrual loans are first applied to principal and any residual amounts are then applied to interest. When facts and circumstances indicate the borrower has regained the ability to meet the required payments, the loan is returned to accrual status. Past due loans are determined on the basis of contractual terms.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In July 2010, the Receivables topic of the Accounting Standards Codification ("ASC") was amended by Accounting Standards Update ("ASU") 2010-20 to require expanded disclosures related to a company's allowance for credit losses and the credit quality of its financing receivables. The amendments require the allowance disclosures to be provided on a disaggregated basis. The Company is required to include these disclosures in their interim and annual financial statements. See Note 6.

Disclosures about Troubled Debt Restructurings ("TDRs") required by ASU 2010-20 were deferred by the Financial Accounting Standards Board ("FASB") in ASU 2011-01 issued in January 2011. In April 2011 FASB issued ASU 2011-02 to assist creditors with their determination of when a restructuring is a TDR. The determination is based on whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties as both events must be present.

Recent Accounting Pronouncements, continued

Disclosures related to TDRs under ASU 2010-20 will be effective for reporting periods beginning after June 15, 2011.

In December 2010, the Intangibles topic of the ASC was amended to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings upon adoption. Impairments occurring subsequent to adoption should be included in earnings. The amendment was effective for the Company beginning January 1, 2011 and had no effect on the financial statements.

In April 2011, the criteria used to determine effective control of transferred assets in the Transfers and Servicing topic of the ASC was amended by ASU 2011-03. The requirement for the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms and the collateral maintenance implementation guidance related to that criterion were removed from the assessment of effective control. The other criteria to assess effective control were not changed. The amendments are effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

ASU 2011-04 was issued in May 2011 to amend the Fair Value Measurement topic of the ASC by clarifying the application of existing fair value measurement and disclosure requirements and by changing particular principles or requirements for measuring fair value or for disclosing information about fair value measurements. The amendments will be effective for the Company beginning January 1, 2012 but are not expected to have a material effect on the financial statements.

The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders' equity. The amendment requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. The amendments will be applicable to the Company on January 1, 2012 and will be applied retrospectively.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events have occurred requiring accrual or disclosure.

Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

Debt and equity securities have been classified in the balance sheets according to management's intent. The amortized costs of securities available for sale and their approximate fair values at June 30, 2011 and December 31, 2010 follow:

AmortizedCost

UnrealizedGains

UnrealizedLosses

FairValue

June 30, 2011

Government-sponsored enterprises

$

2,001,656

$

10,184

$

—

$

2,011,840

Mortgage-backed securities

69,603

2,022

—

71,625

Corporate bonds

550,000

—

116,875

433,125

$

2,621,259

$

12,206

$

116,875

$

2,516,590

December 31, 2010

Government-sponsored enterprises

$

1,500,000

$

1,770

$

—

$

1,501,770

Mortgage-backed securities

74,278

1,584

—

75,862

Corporate bonds

550,000

—

115,500

434,500

$

2,124,278

$

3,354

$

115,500

$

2,012,132

At June 30, 2011 and December 31, 2010, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law. The mortgage-backed securities were pledged to the Federal Home Loan Bank.

Maturities of mortgage-backed bonds are stated based on contractual maturities. Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The scheduled maturities of securities (all available for sale) at June 30, 2011, were as follows:

AmortizedCost

FairValue

Due in one year or less

$

—

$

—

Due after one year through five years

2,001,656

2,011,840

Due after five years through ten years

605,061

489,693

Due after ten years

14,542

15,057

$

2,621,259

$

2,516,590

The following table shows investments' gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at June 30, 2011 and December 31, 2010. These unrealized losses on investment securities are a result of volatility in interest rates and primarily relate to corporate bonds issued by other banks at June 30, 2011 and December 31, 2010.

Less Than 12 Months

12 Months or More

Total

FairValue

UnrealizedLosses

FairValue

UnrealizedLosses

FairValue

UnrealizedLosses

June 30, 2011

Corporate bonds

$

—

$

—

$

433,125

$

116,875

$

433,125

$

116,875

$

—

$

—

$

433,125

$

116,875

$

433,125

$

116,875

December 31, 2010

Corporate bonds

$

—

$

—

$

434,500

$

115,500

$

434,500

$

115,500

$

—

$

—

$

434,500

$

115,500

$

434,500

$

115,500

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based upon this evaluation, there are two securities in the portfolio with unrealized losses for a period greater than 12 months. We have analyzed each individual security for Other Than Temporary Impairment ("OTTI") purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer's financial condition but are due to changes in the level of interest rates and no declines are deemed to be other than temporary in nature.

The Company had no gross realized gains or losses from the sales of investment securities for the six and three month periods ended June 30, 2011 and 2010.

This item represents the entire disclosure related to Available-for-sale Securities which consist of all investments in certain debt and equity securities neither classified as trading or held-to-maturity securities. A debt security represents a creditor relationship with an enterprise. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities which are categorized as Available-for-sale.

Basic earnings per share for the six and three months ended June 30, 2011 and 2010 were calculated by dividing net income available to common stockholders by the weighted average number of shares outstanding during the period.

The computation of diluted earnings per share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of those potential common shares. The potential dilutive shares are represented by common stock options and by the Series A and D convertible preferred stock. Each share of the Series A preferred is convertible into 2.0868 shares of common stock. Each share of Series D preferred is convertible into one share of common stock.

The allocation of the allowance for loan losses by loan components at June 30, 2011 and 2010 was as follows:

Construction

Commercial

&

1-4 Family

Nonfarm,

&

Development

Residential

Nonresidential

Industrial

Consumer

Other

Total

2011

Allowance for credit losses:

Beginning balance

$

118,797

$

1,696,068

$

1,199,292

$

3,411,403

$

205,662

$

52,700

$

6,683,922

Charge-offs

(27,468

)

(1,105,516

)

(203,418

)

(959,152

)

(27,387

)

—

(2,322,941

)

Recoveries

996

54,285

83,772

71,500

17,869

—

228,422

Provision

6,720

77,596

(204,924

)

(537

)

(3,383

)

3,600

(120,928

)

Ending balance

$

99,045

$

722,433

$

874,722

$

2,523,214

$

192,761

$

56,300

$

4,468,475

Ending balance: individually evaluated for impairment

$

645

$

42,233

$

301,922

$

1,468,614

$

—

$

—

$

1,813,414

Ending balance: collectively evaluated for impairment

$

98,400

$

680,200

$

572,800

$

1,054,600

$

192,761

$

56,300

$

2,655,061

Ending balance: loans acquired with deteriorated credit quality

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Loans Receivable:

Ending balance

$

5,544,068

$

42,991,762

$

48,365,786

$

67,791,434

$

6,697,606

$

5,042,967

$

176,433,623

Ending balance: individually evaluated for impairment

$

95,121

$

1,052,398

$

4,094,870

$

6,998,129

$

16,896

$

—

$

12,257,414

Ending balance: collectively evaluated for impairment

$

5,448,947

$

41,939,364

$

44,270,916

$

60,793,305

$

6,680,710

$

5,042,967

$

164,176,209

Ending balance: loans acquired with deteriorated credit quality

$

—

$

—

$

—

$

—

$

—

$

—

$

—

2010

Allowance for credit losses:

Beginning balance

$

106,397

$

628,963

$

696,044

$

2,903,267

$

281,134

$

54,100

$

4,669,905

Charge-offs

—

(26,728

)

(109,948

)

(82,830

)

(48,427

)

—

(267,933

)

Recoveries

—

—

20,501

—

16,672

—

37,173

Provision

(23,497

)

17,173

54,634

1,153,274

5,358

(3,100

)

1,203,842

Ending balance

$

82,900

$

619,408

$

661,231

$

3,973,711

$

254,737

$

51,000

$

5,642,987

Ending balance: individually evaluated for impairment

$

—

$

54,908

$

87,331

$

3,068,511

$

—

$

—

$

3,210,750

Ending balance: collectively evaluated for impairment

$

82,900

$

564,500

$

573,900

$

905,200

$

254,737

$

51,000

$

2,432,237

Ending balance: loans acquired with deteriorated credit quality

$

—

$

—

$

—

$

—

$

—

$

—

$

—

Loans Receivable:

Ending balance

$

6,897,511

$

46,751,717

$

46,438,718

$

68,522,853

$

7,038,277

$

4,636,669

$

180,285,745

Ending balance: individually evaluated for impairment

$

18,144

$

652,749

$

499,457

$

6,543,616

$

17,224

$

5,813

$

7,737,003

Ending balance: collectively evaluated for impairment

$

6,879,367

$

46,098,968

$

45,939,261

$

61,979,237

$

7,021,053

$

4,630,856

$

172,548,742

Ending balance: loans acquired with deteriorated credit quality

$

—

$

—

$

—

$

—

$

—

$

—

$

—

The following table presents impaired loans individually evaluated by class of loan as of June 30, 2011 and December 31, 2010:

Unpaid

Average

Interest

Recorded

Principal

Related

Recorded

Income

Investment

Balance

Allowance

Investment

Recognized

June 30, 2011

With no related allowance recorded:

Construction and development

$

78,500

$

78,500

$

—

$

79,635

$

—

1-4 family residential

865,148

922,961

—

933,245

15,566

Nonfarm, nonresidential

2,437,161

2,599,892

—

2,619,716

49,880

Commercial and industrial

2,645,793

2,645,794

—

2,722,209

70,210

Consumer

16,896

16,896

—

18,437

301

Other loans

—

—

—

—

—

6,043,498

6,264,043

—

6,373,242

135,957

With an allowance recorded:

Construction and development

$

16,622

$

16,622

$

645

$

17,194

$

—

1-4 family residential

187,249

215,624

42,233

198,000

372

Nonfarm, nonresidential

1,657,709

1,657,709

301,992

1,691,991

8,004

Commercial and industrial

4,352,336

4,478,247

1,468,614

4,723,398

76,791

Consumer

—

—

—

—

—

Other loans

—

—

—

—

—

6,213,916

6,368,202

1,813,414

6,630,583

85,167

Combined:

Construction and development

$

95,122

$

95,122

$

645

$

96,829

$

—

1-4 family residential

1,052,397

1,138,585

42,233

1,131,245

15,938

Nonfarm, nonresidential

4,094,870

4,257,601

301,922

4,311,707

57,884

Commercial and industrial

6,998,129

7,124,041

1,468,614

7,445,607

147,001

Consumer

16,896

16,896

—

18,437

301

Other loans

—

—

—

—

—

$

12,257,414

$

12,632,245

$

1,813,414

$

13,003,825

$

221,124

December 31, 2010

With no related allowance recorded:

Construction and development

$

97,436

$

97,436

$

—

$

173,163

$

5,758

1-4 family residential

931,920

931,920

—

938,365

55,516

Nonfarm, nonresidential

2,098,860

2,098,860

—

2,136,591

110,297

Commercial and industrial

2,246,985

2,246,985

—

2,289,276

123,804

Consumer

10,439

10,439

—

10,439

—

Other loans

—

—

—

—

—

5,385,640

5,385,640

—

5,547,834

295,375

With an allowance recorded:

Construction and development

$

39,267

$

39,267

$

12,097

$

38,893

$

1,357

1-4 family residential

1,240,144

1,240,144

1,118,468

1,243,083

39,709

Nonfarm, nonresidential

2,169,536

2,169,536

604,692

2,216,160

126,030

Commercial and industrial

5,803,125

5,803,125

2,334,003

6,076,005

276,677

Consumer

—

—

—

—

—

Other loans

—

—

—

—

—

9,252,072

9,252,072

4,069,260

9,574,141

443,773

Combined:

Construction and development

$

136,703

$

136,703

$

12,097

$

212,056

$

7,115

1-4 family residential

2,172,064

2,172,064

1,118,468

2,181,448

95,225

Nonfarm, nonresidential

4,268,396

4,268,396

604,692

4,352,751

236,327

Commercial and industrial

8,050,110

8,050,110

2,334,003

8,365,281

400,481

Consumer

10,439

10,439

—

10,439

—

Other loans

—

—

—

—

—

$

14,637,712

$

14,637,712

$

4,069,260

$

15,121,975

$

739,148

Nonperforming loans and impaired loans are defined differently. As such, some loans may be included in both categories, whereas other loans may only be included in one category. The following presents by class, an aging analysis of the recorded investment in loans.

Recorded

Investment

> 90 Days

30-89 Days

90 Days Plus

Total

and

Past Due

Past Due

Past Due

Current

Total

Accruing

June 30, 2011

Construction and development

$

180,544

$

—

$

180,544

$

5,363,524

$

5,544,068

$

—

1-4 family residential

943,179

264,167

1,207,346

41,784,416

42,991,762

23,549

Nonfarm, nonresidential

552,023

—

552,023

47,813,763

48,365,786

—

Commercial and industrial

893,742

1,727,612

2,621,354

65,170,080

67,791,434

43,268

Consumer

53,130

8,463

61,593

6,636,013

6,697,606

2,742

Other loans

—

—

—

5,042,967

5,042,967

—

Total

$

2,622,618

$

2,000,242

$

4,622,860

$

171,810,763

$

176,433,623

$

69,559

Non-accruals included above

$

494,212

$

1,930,683

$

2,424,895

$

2,453,363

$

4,878,258

December 31, 2010

Construction and development

$

67,993

$

39,267

$

107,260

$

5,878,785

$

5,986,045

$

—

1-4 family residential

766,017

272,405

1,038,422

45,318,289

46,356,711

—

Nonfarm, nonresidential

229,393

220,321

449,714

47,720,984

48,170,698

—

Commercial and industrial

567,740

1,351,710

1,919,450

64,457,626

66,377,076

—

Consumer

143,832

—

143,832

6,615,938

6,759,770

—

Other loans

3,472

—

3,472

4,778,207

4,781,679

—

Total

$

1,778,447

$

1,883,703

$

3,662,150

$

174,769,829

$

178,431,979

$

—

Non-accruals included above

$

369,103

$

1,883,703

$

2,252,806

$

4,109,322

$

6,362,128

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further impairment or improvement to determine if appropriately classified. All other loans greater than $500,000, commercial lines greater than $250,000 and personal lines of credit greater than $100,000, and unsecured loans greater than $100,000 are specifically reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as when a loan becomes past due, the Company will evaluate the loan grade.

Loans excluded from the scope of the annual review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged off. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans by credit quality indicator are provided in the following table.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, trading securities and derivatives, if present, are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

Under the Fair Value Measurements and Disclosures Topic of FASB ASC, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1

Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2

Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3

Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the Receivables Topic of FASB ASC. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2011 substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with the Fair Value and Measurement Topic of the FASB ASC, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

Servicing Assets

A valuation of loan servicing rights is performed on an individual basis due to the small number of loans serviced. Loans are evaluated on a discounted earnings basis to determine the present value of future earnings. The present value of the future earnings is the estimated market value for the loan, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. As such, the Company classifies loan servicing rights as Level 3.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

(in thousands)

June 30, 2011

Total

Level 1

Level 2

Level 3

Government-sponsored enterprises

$

2,012

$

—

$

2,012

$

—

Mortgage-backed securities

72

—

72

—

Corporate bonds

433

—

433

—

Servicing assets

93

—

—

93

Total assets at fair value

$

2,610

$

—

$

2,517

$

93

Total liabilities at fair value

$

—

$

—

$

—

$

—

(in thousands)

December 31, 2010

Total

Level 1

Level 2

Level 3

Government-sponsored enterprises

$

1,502

$

—

$

1,502

$

—

Mortgage-backed securities

76

—

76

—

Corporate bonds

434

—

434

—

Servicing assets

95

—

—

95

Total assets at fair value

$

2,107

$

—

$

2,012

$

95

Total liabilities at fair value

$

—

$

—

$

—

$

—

For the six months ended June 30, 2011 and 2010, the changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:

Level 3

2011

2010

Fair Value

Fair Value

Balance, January 1

$

94,878

$

—

Capitalized

—

64,115

Amortization included in other income

(1,427

)

(101

)

Balance, June 30

$

93,451

$

64,014

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three month period ended June 30, 2011 was $732, which was amortized to other income. Gains on the sale of government guaranteed loans are presented as a separate component of noninterest income on the consolidated statements of income for the six and three months ended June 30, 2011 and 2010.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets or liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets and liabilities measured at fair value on a nonrecurring basis are included in the table below.

(in thousands)

June 30, 2011

Total

Level 1

Level 2

Level 3

Loans-commercial and industrial

$

2,884

$

—

$

2,884

$

—

Loans-nonfarm, non-residential

1,734

—

1,734

—

Loans-other

207

—

207

—

Foreclosed assets

187

—

187

—

Total assets at fair value

$

5,012

$

—

$

5,012

$

—

Total liabilities at fair value

$

—

$

—

$

—

$

—

(in thousands)

December 31, 2010

Total

Level 1

Level 2

Level 3

Loans-commercial and industrial

$

3,469

$

—

$

3,469

$

—

Loans-nonfarm, non-residential

1,565

—

1,565

—

Loans- 1- 4 family residential

90

—

90

—

Loans-other

56

—

56

—

Foreclosed assets

451

—

451

—

Total assets at fair value

$

5,631

$

—

$

5,631

$

—

Total liabilities at fair value

$

—

$

—

$

—

$

—

The Company had no Level 3 assets or liabilities measured at fair value on a non-recurring basis at June 30, 2011 or December 31, 2010.

Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and due from banks: The carrying amounts reported in the balance sheet for cash and due from banks approximate their fair values.

Interest-bearing deposits with banks: Fair values for time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.

Federal funds sold: Due to the short-term nature of these assets, the carrying value approximates fair value.

Securities: Fair values for securities, excluding restricted equity securities, are based on quoted market prices, where available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The carrying values of restricted equity securities approximate fair values.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows.

Bank owned life insurance: The carrying amount reported in the balance sheet approximates the fair value as it represents the cash surrender value of the life insurance.

Deposit liabilities: The fair values disclosed for demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.

Federal funds purchased, securities sold under agreements to repurchase and short-term debt: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and short-term debt approximate their fair values.

Long-term debt: The fair value of long-term debt is estimated using a discounted cash flow calculation that applies interest rates currently available on similar instruments.

Other liabilities: For fixed-rate loan commitments, fair value considers the difference between current levels of interest rates and the committed rates. The carrying amounts of other liabilities approximate fair value.

The estimated fair values of the Company's financial instruments are as follows (dollars in thousands):